GARWARE INDUSTRIES LTD, MUMBAI V. ACIT CIR 8(1), MUMBAI

ITA 12/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59788 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND SONDE
• Keywords: Depreciation; Question of law; Wrong claim; Unabsorbed depreciation
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJALY PAL RAO, JUDICIAL MEMBER I.T.A.NO.12/MUM/2010 AU 2006-07 GARWARE INDUSTRIES LTD. GARWARE HOUSE, WESTERN EXPRESS HIGHWAY, VILE PARLE (E), MUMBAI 400 057. PAN: AABCG 4011 G VS. ASST. COMMISSIONER OF I.T., CIRCLE 8 (1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARVIND SONDE. RESPONDENT BY : SHRI PAVAN VED. DATE OF HEARING : 15-12-2011. DATE OF PRONOUNCEMENT: 20-01-2012. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, BUT THE ONLY DISPUTE IS REGARDING LEVY OF PENALTY U/S.271(1). 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS MADE A CLAIM FOR BROUGHT FORWARD UNABSORBED DEPRECIATION AMOUNTI NG TO RS.4,04,63,484/-. HOWEVER, IT WAS NOTED FROM THE AS SESSMENT RECORDS OF A.Y 2005-06 THAT ASSESSEE HAS ALREADY MADE CLAIM S OF SUCH DEPRECIATION. IN RESPONSE TO A QUERY THAT WHY SUCH DEPRECIATION SHOULD NOT BE DISALLOWED, ASSESSEE REPLIED VIDE LETTER DAT ED 5-11-08 AS UNDER: ITA NO.12 OF 2010 2 WHILE WORKING OUT THE COMPUTATION FOR A.Y. 2006-07 , THE CLAIM OF UNABSORBED DEPRECIATION FOR A.Y. 2005-06 WAS INADVE RTENTLY TAKEN AMOUNTING TO RS.403.65 LACS. THIS ERROR OCCURRED U NDER THE ERRONEOUS BELIEF THAT SINCE FOR A.Y. 2005-06 THE MAT INCOME I S CONSIDERED, DEDUCTION FOR DEPRECIATION HAS NOT BEEN CLAIMED IN THAT AND THEREFORE THIS DEDUCTION WILL BE ALLOWED AS UNABSORBED DEPREC IATION. FURTHER, IT WAS FOUND THAT ASSESSEE HAD CLAIMED THA T DIVIDEND INCOME OF RS.5,78,932/- WAS EXEMPT U/S.10[35]. IT WAS NOTE D THAT DIVIDEND WAS EARNED FROM CO-OPERATIVE BANK AND THEREFORE NOT EXEMPT. THESE TWO AMOUNTS WERE ADDED TO THE INCOME OF THE ASSESSE E AND PENALTY PROCEEDINGS U/S.271(1) WERE ALSO INITIATED. IN RES PONSE TO A SHOW CAUSE NOTICE AGAINST THE LEVY OF PENALTY IT WAS MAI NLY SUBMITTED THAT ASSESSEE HAD ITSELF ADMITTED THAT UNABSORBED DEPREC IATION WAS CLAIMED ON ACCOUNT OF ERRONEOUS BELIEF BECAUSE INCOME FOR A .Y 2005-06 WAS COMPUTED UNDER THE MAT PROVISIONS. IN FACT, ASSESSE E ITSELF HAS ALSO FILED A REVISED COMPUTATION BY OFFERING THE UNABSOR BED DEPRECIATION AND, THEREFORE, PENALTY IS NOT LEVIABLE. HOWEVER, A O DID NOT FIND FORCE IN THIS SUBMISSION AND AFTER DISCUSSING SOME CASE L AWS CONFIRMED THE PENALTY. 3. BEFORE THE LD. CIT(A) SIMILAR SUBMISSIONS WERE R EITERATED. HOWEVER, LD. CIT(A) ALSO DID NOT FIND FORCE IN THES E SUBMISSIONS AND CONFIRMED THE ACTION OF THE AO. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE REFERRED TO PAGE-1 OF THE PAPER BOOK AND POINTED OUT THAT DEPRECIATION OF RS. 4,04,63,485/- WAS CLAIMED IN THE COMPUTATION PREPARED UNDER THE NORMA L PROVISIONS OF THE ACT DURING THE YEAR. HOWEVER, THE INCOME WAS CO MPUTED UNDER THE ITA NO.12 OF 2010 3 MAT PROVISIONS AS PER PAGE-2 OF THE PAPER BOOK. HE THEN REFERRED TO PAGE 19 WHICH IS A COPY OF THE COMPUTATION FOR A.Y 2005-06 WHEREIN NORMAL DEPRECIATION AMOUNTING TO RS.4,04,63,485/- W AS CLAIMED AND IN THAT YEAR ALSO INCOME WAS COMPUTED UNDER THE MAT PR OVISIONS. SINCE INCOME WAS COMPUTED FOR A.Y 2005-06 UNDER THE MAT P ROVISIONS, THEREFORE, ASSESSEE MADE A MISTAKE OF CLAIMING THE DEPRECIATION BECAUSE OF THE IMPRESSION THAT IN VIEW OF THE MAT P ROVISIONS DEPRECIATION WAS NOT ALLOWED IN THE EARLIER YEAR. H E ALSO REFERRED TO THE COPY OF THE TAX AUDIT REPORT AND PARTICULARLY INVIT ED OUR ATTENTION TO COL.25 OF THE TAX AUDIT REPORT WHEREIN DEPRECIATION WAS SHOWN AS CARRIED FORWARD AS UNDER: SR. NO. ASSESSMENT YEAR NATURE OF LOSS/ ALLOWANCE [IN RUPEES] AMOUNT AS RETURNED [IN RUPEES] AMOUNT AS ASSESSED [GIVE REF. TO RELEVANT ORDER] REMARKS 1 2005-06 40463485/- 40463485/- 40463485/- (MUMC98101 DT.31 .03.2006) U/S 143(1) OF THE I. TAX UNABSORBED DEPRECIATION ALLOWANCE THE MISTAKE HAPPENED BECAUSE OF THE EXPERT OPINION OF THE AUDITOR. 5. THE LD. COUNSEL OF THE ASSESSEE ARGUED THAT IF A N ADVICE OF AN EXPERT IS FOLLOWED THEN THE PERSON FOLLOWING SUCH A DVICE ASSESSEE CANNOT BE HELD TO BE RESPONSIBLE FOR SUCH A WRONG A DVICE. IN THIS REGARD HE RELIED ON THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF CONCORD OF INDIA INSURANCE CO. LTD. VS. SMT . NIRMALA DEVI & ORS. [118 ITR 507]. HE POINTED OUT THAT IF ASSESSEE HAS FOLLOWED SUCH AN ADVICE WHICH WAS NOT CORRECT, THEN ASSESSEE SHOU LD NOT BE LIABLE TO ITA NO.12 OF 2010 4 PENAL ACTION. PENALTY IN SUCH CIRCUMSTANCES WAS HEL D TO BE NOT LEVIABLE IN THE FOLLOWING CASES: A) CIT VS. DEEPAK KUMAR 232 CTR (P&H) 78 B) CIT VS. AMAR NATH 173 TAXMAN 395 (P&H) C) CIT VS. SIDHARTHA ENTERPRISES. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE AO. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT DEPRECIATION IN EARLIER WAS ALSO CLAIMED BUT SINCE FINAL INCOME WAS RETURNED UNDER MAT PROVISIONS, THEREFORE, ASSESSEE MAY BE UNDER AN ERRONEOUS BELIEF THAT SUCH DEPRECIATION WAS NOT ALLOWED IN THE EARLI ER YEAR. FURTHER, THE AUDITOR OF THE COMPANY HAD SHOWN IN THE REPORT THAT SUCH DEPRECIATION WAS BROUGHT FORWARD. THEREFORE, ASSESSEE FOLLOWING THIS OPINION, FILED A WRONG RETURN. IN FACT, ASSESSEE HAD REVISED THE COM PUTATION DURING THE ASSESSMENT PROCEEDINGS AND ADMITTED THIS MISTAKE. T HE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DEEPAK KU MAR [SUPRA] HELD AS UNDER: THE QUESTION CONCERNING BONA FIDE MISTAKE OR BELIE F IS MORE OR LESS A QUESTION OF FACT, WHICH HAS BEEN DECIDED BY THE CIT (A) ON THE BASIS OF THE AFFIDAVIT FILED BY THE COUNSEL. THERE IS NO FIN DING OF INTENTIONAL AND MOTIVATED MISTAKE WHICH MIGHT HAVE BEEN RESORTED TO BY THE ASSESSEE. IT IS NOT UNKNOWN THAT IT RETURNS ARE FILED THROUGH THE EXPERTS IN THE IT LAWS AND, THEREFORE, THE ADVISE GIVEN BY THE COUNSE L CAN BE ACTED UPON WITH BONA FIDE BELIEF TO BE CORRECT. THERE IS NO RU LE OF LAW THAT THE AFORESAID ISSUE SHOULD HAVE BEEN PRESSED ONLY BEFOR E THE AO OR THERE WAS ANY BAR ON THE ASSESSEE NOT TO RAISE THIS ISSUE BEFORE THE APPELLATE AUTHORITY. THE AFFIDAVIT FILED BY THE COUNSEL OF TH E ASSESSEE, HAS BEEN READILY ACCEPTED BY THE CIT(A) AS WELL AS BY THE TR IBUNAL. IT IS WELL SETTLED THAT IF ON THE EVIDENCE ADDUCED BEFORE THE AO OR THE APPELLATE FORUM, A POSSIBLE VIEW HAS BEEN TAKEN THEN UNDER S. 260A, NO SUBSTANTIVE QUESTION OF LAW COULD BE FRAMED MERELY BECAUSE ANOTHER ITA NO.12 OF 2010 5 VIEW IS POSSIBLE. THE APPEAL IS, THUS, WITHOUT MERI T AND ACCORDINGLY THE SAME IS DISMISSED. IN CIT VS. AMAR NATH [SUPRA] IT WAS HELD AS UNDER: IT APPEARED THAT THE ASSESSEE HAD CLAIMED WRONG DE DUCTION ON THE ADVICE OF HIS COUNSEL AND IN THAT REGARD, AN AFFIDA VIT OF COUNSEL OF THE ASSESSEE HAD ALSO BEEN FILED BEFORE THE COMMISSIONE R (APPEALS). THE THEN COUNSEL OF THE ASSESSEE HAD CATEGORICALLY ADMI TTED THAT HE HAD ADVISED THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTI ON 10(36) IN RESPECT OF THE SHARES SOLD DURING THE FINANCIAL YEAR 2003-0 4. THE REVENUE HAD NOT REBUTTED THE SAID AFFIDAVIT AT ANY STAGE. THUS, THE ASSESSEE HAD ACTED UPON THE ADVICE OF HIS COUNSEL IN THE CASE OF MANOJ AHUJAV. JAC[1 984]JSOITR 696/17 TAXMAN 365 (PUNJ. & HAR.), IT HAS BEEN HELD THAT NO LITIGANT SHOULD ORDINARILY SUFFER FOR THE MISTAK E OF HIS COUNSEL FURTHER, SINCE THE ASSESSEE HAD FURNISHED ALL THE D ETAILS RELATING TO THE CAPITAL GAINS ALONG WITH RETURN OF INCOME, IT COULD NOT BE SAID THAT THE ASSESSEE 1ZAD CONCEALED ANYTHING FROM THE REVENUE. THEREFORE, THAT MIGHT BE A GOOD CASE FOR MAKING ADDITION AGAINST TH E ASSESSEE SINCE HE HAD MADE A WRONG CLAIM. HOWEVER, THAT ADDITION, IN ITSELF, WAS NOT SUFFICIENT FOR LEVYING THE PENALTY UNDER SECTION 27 1(1)(C). IN VIEW OF THE FACT THAT THE ASSESSEE HAD CLAIMED SAID DEDUCTI ON UNDER A BONA FIDE BELIEF THAT HE WAS EN TITLED TO THE SAID DEDUCTION ON BASIS OF LEGAL ADVICE GIVEN BY HIS COUNSEL; AND THAT HE HAD FURNIS HED ALL DETAILS RELATING TO THE CAPITAL GAINS ALONG WITH RETURN OF INCOME, IT COULD NOT BE HELD THAT THERE WAS ANY MALAFIDE INTENTION OF THE A SSESSEE TO CONCEAL THE INCOME AND IN THE CASE OF CIT VS. SIDHARTHA ENTERPRISES [S UPRA], IT WAS HELD AS UNDER: HE1D, DISMISSING THE APPEAL, THAT PENALTY UNDER SE CTION 271(IJ(C) OF THE INCOME-TAX ACT, 1961, WAS IMPOSED ONLY WHEN THE RE WAS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAK E. THE FINDING HAD BEEN RECORDED ON THE FACTS THAT THE FURNISHING OF I NACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT T O EVADE TAX. THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE HELD TO BE PERVERSE. Z%{E1D, DISMISSING THE APPEAL, THAT PENALTY UNDER SECTION 2 71(IJ(C) OF THE INCOME-TAX ACT, 1961, WAS IMPOSED ONLY WHEN THERE W AS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT A MERE MISTAK E. THE FINDING HAD BEEN RECORDED ON THE FACTS THAT THE FURNISHING OF I NACCURATE PARTICULARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT T O EVADE TAX. THE VIEW TAKEN BY THE TRIBUNAL COULD NOT BE HELD TO BE PERVERSE. ITA NO.12 OF 2010 6 FROM THE ABOVE IT IS CLEAR THAT SIMPLY BECAUSE A MI STAKE HAS BEEN COMMITTED ON THE ADVISE OF THE AUDITOR, THEN SUCH ADDITION CANNOT LEAD TO THE ACTION OF IMPOSITION OF PENALTY. 8. AS FAR AS ADDITION OF DIVIDEND IS CONCERNED, A N ORMAL DIVIDEND WAS EXEMPT U/S.10[34] AND IT IS VERY MUCH POSSIBLE THAT DIVIDEND FROM THE CO-OPERATIVE BANK WAS ALSO TREATED AS NORMAL DI VIDEND. THIS ALSO SEEMS TO BE A CASE OF BONA FIDE BELIEF AND IN SUCH CIRCUMSTANCES PENALTY IS NOT ATTRACTED. THEREFORE, WE ARE OF THE OPINION THAT WHEN ASSESSEE IS MAKING SOME CLAIM ON BONA FIDE BASIS OR UNDER THE WRONG ADVISE OF THE COUNSEL THEN PENALTY CANNOT BE LEVIED . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE TH E PENALTY. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20/01/2012. SD/- SD/- ( VIJAY PAL RAO ) (T.R.SO OD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 20 TH JANUARY, 2012. P/-* COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. ITA NO.12 OF 2010 7 S R.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON 12 - 1 - 12 P 2 DRAFT PLACED BEFORE AUTHOR 12 - 1 - 12 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVE D DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R 10 DATE OF DISPATCH OF ORDER